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The House of Representatives on March 1 passed controversial consumer bankruptcy reform legislation that if enacted would include significant changes for corporate filers. The House voted 306-108 to approve H.R. 333, the “Bankruptcy Abuse Prevention and Consumer Protection Act,” which critics decry as too creditor-friendly. Supporters say the legislation is necessary to stem bankruptcy abuse. One bill provision would cap the exclusive period for a debtor to file for bankruptcy protection at 18 months. If a reorganization plan is not submitted by that point, then creditors would be allowed to seek court approval for their own plans. The bankruptcy code currently does not have a time limit. The change could be burdensome for large companies filing for Chapter 11 bankruptcy protection, attorneys and bankruptcy experts say. The proposed legislation also includes a controversial provision that narrowly applies to retailers that file for Chapter 11 bankruptcy. The proposal sets a 120-day limit for a retailer to decide whether it will continue with or turn over its leases to a landlord. Leases often are a bankrupt retailer’s most valuable asset. Bankruptcy judges have criticized the legislation for creating only 23 additional judgeships, arguing that many more are needed. Congress has not authorized additional bankruptcy judgeships since 1992, when it approved 35 new positions. The Senate Judiciary Committee approved the upper chamber’s version of the bill Wednesday in a 10-8 vote. It has forwarded the measure to the full Senate for consideration. The House and Senate approved nearly identical legislation last year, but then-President Clinton vetoed it last year. President Bush said he expects to sign bankruptcy legislation this year. Copyright (c)2001 TDD, LLC. All rights reserved.

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